Kunming-Montreal Global Biodiversity Framework was signed at COP 15 (December 2022)
The Kunming-Montreal Global Biodiversity Framework , contains global goals and targets aimed at protecting and restoring nature for current and future generations. The UK and 194 other countries have signed on. The deal agrees to protect 30% of the planet’s land and 30% of coastal and marine areas by 2030 (known as “30-by-30”), thereby seeking to reverse natural ecosystem decline, through:
- Maintaining, enhancing and restoring ecosystems, including halting species extinction and maintaining genetic diversity
- "Sustainable use" of biodiversity: ensuring that species and habitats can provide the services they provide for humanity, such as food and clean water
- Ensuring that the benefits of resources from nature, like medicines that come from plants, are shared fairly and equally and that indigenous peoples' rights are protected
- Paying for and putting resources into biodiversity: ensuring that money and conservation efforts get to where they are needed
- Reduction of pesticide use and subsidies that deplete biodiversity by 2025, whilst eliminating, phasing out or reforming them
Signatories aim to channel $200 billion per year to conservation initiatives, from public and private sources. Developed nations will contribute a combined total of at least $25 billion of this every year by 2025, and $30 billion per year by 2030. The deal also calls for giving low-income countries “far more” in financial support than is currently provided for their efforts to protect nature (this may take time to agree though, as seen with the experience around transfer of climate adaptation support). Furthermore, parties agreed to make large companies and financial institutions being subject to “requirements” to make disclosures regarding their operations, supply chains and portfolios.
ESG Rating providers are likely to be regulated (December 2022)
Providers of ESG ratings face being regulated in the UK under a plan put forward by the UK government, which would make the UK the first country to do so . Jeremy Hunt, the UK Chancellor of the Exchequer, announced the government will consult on potential regulation in Q1 2023 with the intention to improve transparency and market conduct. This follows on from similar sentiment expressed by European Securities and Markets Authority (ESMA) and other EU financial services regulators.
No further details of what the ESG ratings regulation would cover have been provided, although the FCA previously identified areas of focus. These include disclosure of methodologies, sources of information used and potential conflicts of interest. This follows the FCA announcement in November to convene a working group to develop a ‘code of conduct’ for ESG data and ratings providers. The UK Treasury will join this working group as an observer. The announcement has been welcomed by both the FCA and the investment industry.
UK Net Zero Review results published (January 2023)
In 2022 the UK government commissioned a review into its approach to achieving its Net Zero Strategy , published in 2021, given the change in the economic and macro environment. Chris Skidmore, former Energy Minister, led the review and in January 2023 the review report  was released making 129 recommendations. These focused on:
- Using infrastructure to unlock net zero
- Creating sustainable governance structures for net zero
- Backing businesses to go green
- Catalysing local action
- Increasing transparency and engaging people
- Delivering cleaner, cheaper, greener homes
- Conducting a strategic review on the UK’s international climate leadership
- Investing in R&D and technology
The results of the review are expected to feed into the updated Net Zero and Green Finance Strategies to be announced by the UK Government during Q1 2023.
European Commission proposed amend to the EU Prospectus Regulation to include ESG factors (December 2022)
The Commission adopted a proposal  for a regulation which included amends the EU Prospectus Regulation. For debt securities advertised as ‘taking into account’ ESG factors or pursuing ESG objectives, certain ESG-related information will be required to be included in an annex of the prospectus. The proposal clarifies that the delegated acts setting out specific requirements will be adopted by the Commission.
For issuers of equity securities, the delegated acts will also consider whether the issuer is subject to the sustainability reporting under the upcoming Corporate Sustainability Reporting Directive, and will require sustainability reporting to be incorporated (by reference) alongside / as part of the management reports.
This follows on a position paper  by the Dutch Authority for the Financial Markets (AFM) and Autorité des Marchés Financiers (AMF) published in 2019, outlining their common views on the content of the prospectus for green bonds.
Final text of EU Corporate Sustainability Reporting Directive published in the EU’s Official Journal (December 2022)
Final legal requirements of the CSRD have now been published in the Official Journal of the European Union . The Official Journal is a statement of record for the European Union and only legal acts published in the Official Journal are binding
As a reminder, the CSRD will impact corporate reporting and the effective date will vary on the type of company. For companies already required to prepare a non-financial information statement under the EU NFRD, the CSRD is effective for periods starting on or after 1 January 2024 (i.e., first reporting to take place in 2025, in reference to the year of 2024). For other types of companies, a staged approach has been adopted:
- 2026 reporting for the financial year 2025 – for large companies (public and private) that are not currently subject to the NFRD
- 2027 reporting for the financial year 2026 for listed SMEs (except micro undertakings) and other smaller and non-complex companies
- 2029 reporting for the financial year 2028 for third-country companies with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding specified thresholds
The European Commission is due to adopt the European sustainability reporting standards under the CSRD by June 2023.
European Council reveals its position on the EU Corporate Sustainability Due Diligence Directive (December 2022)
The CSDDD was published by the Commission in February 2022 and introduced rules on obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, their subsidiaries, and those carried out by their business partners. The proposal also requires the largest companies to publish mandatory climate transition plans aligned with the 1.5C scenario.
The Council has adopted its negotiating position on the directive which gives the Council a mandate to start negotiations with the European Parliament .
The European Parliament is currently shaping its own position and debates are taking place whether and to what extent financial institutions, and their business relationships, must be included in the scope of the legislation. The Parliament is looking to finalise its stance by May 2023.
Once adopted / fully adopted, member states will still have two years to transpose the Directive into national law before it applies.
EC proposed a voluntary framework for carbon removal certification (December 2022)
The European Commission announced its proposal on carbon removal certification, which would be the first EU-wide voluntary framework to certify high-quality carbon removals . The aim of the proposal is to expand sustainable carbon removals and encourage the use of innovative solutions to capture, recycle and store CO2 by farmers, foresters, and industries. The proposal forms part of the European Green Deal and is still to be debated by the EU Parliament and the EU Council.
The proposal sets out rules for the independent verification of carbon removals, as well as rules to recognise certification schemes that can be used to demonstrate compliance with the EU framework. To ensure the quality and comparability of carbon removals, the proposed regulation establishes four quality criteria:
1. Quantification: Carbon removal activities need to be measured accurately and deliver unambiguous benefits for the climate
2. Additionality: Carbon removal activities need to go beyond existing practices and what is required by law
3. Long-term storage: Certificates are linked to the duration of carbon storage so as to ensure permanent storage
4. Sustainability: Carbon removal activities must preserve or contribute to sustainability objectives such as climate change adaptation, circular economy, water and marine resources, and biodiversity
EC adopted final standards on ESG risk (Pillar 3) disclosures (January 2023)
The European Commission adopted its ESG Pillar 3 ITS  on ESG risk disclosures under the EU Capital Requirements Regulation. Pillar 3 of the Basel Framework states the disclosure requirements to assess an internationally active bank's material risks and capital adequacy.
The summary fact sheet in short, sets out the fact the ITS has the following disclosure requirements:
- Qualitative information on ESG risks: describing the integration of such risks in business strategy and processes, governance, and risk management
- Quantitative information on climate change transition risks: covering credit quality of exposures, energy efficiency of immovable property as collateral for loans, using specific alignment metrics and disclosures on exposures to top 20 carbon-intensive counterparties
- Quantitative information on climate change physical risks: requiring a breakdown of exposures to activities by sector (NACE code) and geographic location, including for loans, debt securities, equity instruments that are NOT held for trading or sale, and loans collateralised with immovable property
- Quantitative information on mitigating actions associated with activities that qualify as environmentally sustainable under the EU Green Taxonomy: through the KPIs and green asset ratio (GAR), defined in under the Taxonomy Regulation (Article 8)
- Quantitative information on other mitigation actions and exposures to climate change-related risks that do not qualify under the Taxonomy: which still support the transition and adaptation process with regard to climate change mitigation and adaptation, explaining the type and nature of mitigation actions and risks they aim to mitigate
The application timeline follows a phase-in approach with first reporting due in 2023 in reference to 2022 (information on ESG transition and physical risks). The requirements will then progressively expand over 2023-2025 to include, among others, key performance indicators (KPIs) on Taxonomy-aligned exposures, Scope 3 emissions and temperature alignment portfolio metrics.
ECB published climate-related indicators to help analyse climate-related risks in financial sector and monitor green transition (January 2023)
As part of its climate action  plan, the European Central Bank has published its first set of climate-related statistical indicators to be able to assess the impact of climate-related risks on the financial sector and to monitor the development of sustainable and green finance .
The indicators cover three areas:
- Experimental indicators on sustainable finance: provide an overview of debt instruments labelled as “green”, “social”, “sustainability” or “sustainability-linked” by the issuer that are issued or held in the euro area
- Analytical indicators on carbon emissions financed by financial institutions: provide information on the carbon intensity of the securities and loan portfolios of financial institutions, and on the financial sector’s exposure to counterparties with carbon-intensive business models
- Analytical indicators on climate-related physical risks: analyse the impact of natural hazards, such as floods, wildfires or storms, on the performance of loans, bonds and equities portfolios
The publication of the new climate-related indicators is another step towards delivering on the ECB’s climate commitments. They are intended to start a broader conversation within the statistical and research community and with other key stakeholders on how to better capture data on climate-related risks and the green transition. The ECB, together with the national central banks, will work to improve the methodology and the data used.
European Banking Authority (EBA) published its new roadmap on sustainable finance (January 2023)
The European Banking Authority (EBA) published its roadmap outlining the objectives and timeline for delivering mandates and tasks in sustainable finance and environmental, social and governance risks .
The roadmap builds on and replaces the EBA’s first action plan on sustainable finance published in December 2019. It explains the EBA’s sequenced and comprehensive approach over the next three years to integrate ESG risks considerations in banking and support the EU’s efforts to achieve the transition to a more sustainable economy.
Key objectives of the EBA’s roadmap on Sustainable Finance